With an unregulated input to the IC of 18VDC and an output of 1.2V at 3A then the IC dissipates 50.4W. If its heatsink is infinite and perfect then the chip's temperature is about 175 degrees C (well over its max allowed temperature of 125 degrees C).
But its little heatsink is good for only about 10W to 15W.
If the input is 18VDC and the output is trying to be 15VDC at 3A then the output will be full of ripple because the main filter capacitor is much too small.
Your 18.5V (x2) transformer has a voltage that is too high and it produces +25V at the input of the IC regulator. If the circuit has the pot turned down so the output voltage is 6V then the IC must try to dissipate 57W when the current is 3A which will cause it to overheat and shutdown.
The IC protects itself by reducing its max output current when it has a fairly high voltage between its input and output.